SThe major process in which European refiners
are investing to significantly increase distillate yields is
hydrocracking.Fluid catalytic
cracking units (FCC), which many refiners in both Europe and the U.S. have,
take heavier materials from distillation units and produce mostly
gasoline.The hydrocracking units use
heavy feedstocks, and can generate more distillate.

SAs this slide shows, European refiners have
been increasing hydrocracking capacity to increase production of diesel
compared to gasoline.Since 1990,
hydrocracking as a percent of distillation capacity has increased from 2% to
almost 7%, while FCC capacity as a percent of distillation has leveled at
about 16%.

SDespite the growth in hydrodcracking capacity,
the deficit in diesel production and the excess in gasoline production
compared to demand have continued to grow.Additional planned hydrocracking investments would increase average
European refinery distillate yields by perhaps 2 percent.However, even this increase in distillate
yield likely will be insufficient to keep up with the gasoline-to-diesel
demand shift.

SThis implies that Western Europe may be able
to provide the United States with higher gasoline imports in the next few
years.